【do sealy mattress have fiberglass】Do You Know What Trio Industrial Electronics Group Limited’s (HKG:1710) P/E Ratio Means?

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This article is for investors who would like to improve their understanding of price to earnings ratios (P/E ratios). We’ll show how you can use Trio Industrial Electronics Group Limited’s (

HKG:1710

) P/E ratio to inform your assessment of the investment opportunity. Based on the last twelve months,

Trio Industrial Electronics Group’s P/E ratio is 4.95

. That corresponds to an earnings yield of approximately 20%.

Check out our latest analysis for Trio Industrial Electronics Group

How Do You Calculate A P/E Ratio?

The

formula for P/E

is:

Price to Earnings Ratio = Price per Share ÷ Earnings per Share (EPS)

Or for Trio Industrial Electronics Group:

P/E of 4.95 = HK$0.28 ÷ HK$0.057 (Based on the trailing twelve months to June 2018.)

Is A High Price-to-Earnings Ratio Good?

A higher P/E ratio means that buyers have to pay

a higher price

for each HK$1 the company has earned over the last year. That isn’t necessarily good or bad, but a high P/E implies relatively high expectations of what a company can achieve in the future.

How Growth Rates Impact P/E Ratios

Earnings growth rates have a big influence on P/E ratios. Earnings growth means that in the future the ‘E’ will be higher. Therefore, even if you pay a high multiple of earnings now, that multiple will become lower in the future. So while a stock may look expensive based on past earnings, it could be cheap based on future earnings.

Trio Industrial Electronics Group shrunk earnings per share by 41% over the last year.

How Does Trio Industrial Electronics Group’s P/E Ratio Compare To Its Peers?

We can get an indication of market expectations by looking at the P/E ratio. The image below shows that Trio Industrial Electronics Group has a lower P/E than the average (8.1) P/E for companies in the electronic industry.

SEHK:1710 PE PEG Gauge February 1st 19

Trio Industrial Electronics Group’s P/E tells us that market participants think it will not fare as well as its peers in the same industry. Since the market seems unimpressed with Trio Industrial Electronics Group, it’s quite possible it could surprise on the upside. It is arguably worth checking

if insiders are buying shares

, because that might imply they believe the stock is undervalued.

Remember: P/E Ratios Don’t Consider The Balance Sheet

The ‘Price’ in P/E reflects the market capitalization of the company. Thus, the metric does not reflect cash or debt held by the company. Theoretically, a business can improve its earnings (and produce a lower P/E in the future), by taking on debt (or spending its remaining cash).

Spending on growth might be good or bad a few years later, but the point is that the P/E ratio does not account for the option (or lack thereof).

Is Debt Impacting Trio Industrial Electronics Group’s P/E?

The extra options and safety that comes with Trio Industrial Electronics Group’s HK$77m net cash position means that it deserves a higher P/E than it would if it had a lot of net debt.

The Verdict On Trio Industrial Electronics Group’s P/E Ratio

Trio Industrial Electronics Group has a P/E of 5. That’s below the average in the HK market, which is 10.4. The recent drop in earnings per share would make investors cautious, the relatively strong balance sheet will allow the company time to invest in growth. If it achieves that, then there’s real potential that the low P/E could eventually indicate undervaluation.

Investors should be looking to buy stocks that the market is wrong about. If it is underestimating a company, investors can make money by buying and holding the shares until the market corrects itself. Although we don’t have analyst forecasts, you might want to assess

this data-rich visualization

of earnings, revenue and cash flow.

You might be able to find a better buy than Trio Industrial Electronics Group. If you want a selection of possible winners, check out this

free

list of interesting companies that trade on a P/E below 20 (but have proven they can grow earnings).

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at

[email protected]

.

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